Daniel Kahneman

Daniel Kahneman

Daniel Kahneman (born March 5, 1934 in Tel Aviv, in the (then Palestine, now in Israel), is an Israeli-American psychologist and Nobel laureate, notable for his work on behavioral finance and hedonic psychology.

With Amos Tversky and others, Kahneman established a cognitive basis for common human errors using heuristics and biases (Kahneman & Tversky, 1973, Kahneman, Slovic & Tversky, 1982), and developed Prospect theory (Kahneman & Tversky, 1979). He was awarded the 2002 the Nobel Prize in Economics for his work in Prospect theory.

Biography

Childhood

Daniel Kahneman was born in Tel Aviv in 1934, while his mother was visiting relatives. He spent his childhood years in Paris, France]], where his parents had emigrated from Lithuania in the early 1920s. Kahneman and his family were in Paris when it was occupied by Nazi Germany in 1940. His father was picked up in the first major round-up of French Jews, but was released after six weeks due to the intervention of his employer. The family was on the run for the remainder of the war, and survived intact except for the death of Kahneman's father of diabetes in 1944. Daniel Kahnemann and his family then moved to Palestine (which was soon to become Israel) in 1946 (Kahneman, 2003).

Kahneman has written of his experience in Nazi-occupied France, explaining in part why he entered the field of psychology:

It must have been late 1941 or early 1942. Jews were required to wear the Star of David and to obey a 6 p.m. curfew. I had gone to play with a Christian friend and had stayed too late. I turned my brown sweater inside out to walk the few blocks home. As I was walking down an empty street, I saw a German soldier approaching. He was wearing the black uniform that I had been told to fear more than others – the one worn by specially recruited SS soldiers. As I came closer to him, trying to walk fast, I noticed that he was looking at me intently. Then he beckoned me over, picked me up, and hugged me. I was terrified that he would notice the star inside my sweater. He was speaking to me with great emotion, in German. When he put me down, he opened his wallet, showed me a picture of a boy, and gave me some money. I went home more certain than ever that my mother was right: people were endlessly complicated and interesting (Kahneman, 2003, p. 417).

Education and Military Service

Kahneman received his B. Sc. with a major in psychology and a minor in mathematics from the Hebrew University in Jerusalem in 1954. After obtaining his undergraduate degree, he served in the psychology department of the Israeli Defense Forces. One of his responsibilities was to evaluate candidates for officer training school, and to develop tests and measures for this purpose. In 1958, he went to the United States to earn his Ph. D. in Psychology from the University of California, Berkeley in 1961.

Early Career: Cognitive Psychology at Hebrew University

Dr. Kahneman began his academic career as a lecturer in psychology at Hebrew University in 1961. He was promoted to senior lecturer in 1966. His early work focused on visual perception and attention. For example, his first publication in the prestigious journal Science was entitled "Pupil Diameter and Load on Memory" (Kahneman & Beatty, 1966). During this period, Dr. Kahneman was a visiting scientist at the University of Michigan (1965–1966) and the Applied Psychological Research Unit in Cambridge (1968/1969, summers). He was a fellow at the Center for Cognitive Studies and a lecturer in psychology at Harvard University in 1966/1967.

Early Mid-Career: Amos Tversky and the study of Judgment and Decision-Making

This period marks the beginning of Kahneman's lengthy collaboration with Amos Tversky. Together, Kahneman and Tversky published a series of seminal articles in the general field of Judgment and Decision-Making, culminating in the publication of their seminal Prospect theory in 1979 (Kahneman & Tversky, 1979). Dr. Kahneman was awarded the Nobel Prize in Economics in 2002 for his work on Prospect Theory, and it is generally regarded as a given that Tversky would also have received the prize had he still been alive (he died in 1996).

In his Nobel biography, Kahneman states that his collaboration with Tversky began after Kahneman had invited Tversky to give a guest lecture to one of Kahneman's seminars at Hebrew University, sometime during the years 1968-1969. Their first jointly authored paper, "Belief in the Law of Small Numbers," was published in 1971 (Tversky & Kahneman, 1971). They published 7 articles in peer-review journals in the years 1971–1979. Aside from "Prospect Theory," the most important of these articles was "Judgment Under Uncertainty: Heuristics and Biases" (Tversky & Kahneman, 1974), which was published in the prestigious journal Science.

Kahneman left Hebrew University in 1978 to take a position at the University of British Columbia. This move had no immediate effect on his collaborations with Tversky, for Tversky moved to Stanford University that same year.

Late Mid-Career: Behavioral Economics

Kahneman and Tversky were both fellows at the Center for Advanced Studies in the Behavioral Sciences at Stanford University in the academic year 1977-1978. A young economist named Richard Thaler was a visiting professor at the Stanford branch of the National Bureau of Economic Research during that same year. According to Kahneman, "[Thaler and I] soon became friends, and have ever since had a considerable influence on each other's thinking" (Kahneman, 2003, p. 437). Building on Prospect theory and Kahneman and Tversky's body of work, Thaler published "Toward a Positive Theory of Human Choice" in 1980, a paper which Kahneman has called "the founding text in behavioral economics" (Kahneman, 2003, p. 438).

Kahneman and Tversky both became heavily involved in the development of this new approach to economic theory, and their involvement in this movement had the effect of reducing the intensity and exclusivity of their earlier period of joint collaboration. Although they would continue to publish together until the end of Tversky's life, their years of near-exclusive collaboration were coming to an end.

The period when Kahneman published almost exclusively with Tversky began to wind down in 1983, when Kahneman published two papers with Anne Treisman, his wife since 1978.

The Nobel Prize

In 2002, Dr. Kahneman received the Nobel Prize in Economics , despite being a research psychologist, for his work in Prospect theory. In fact, Kahneman claims to have never taken a single economics course — he claims that what he knows of the subject he and Tversky learned from collaborators Richard Thaler and Jack Knetsch.

Present

Dr. Kahneman is currently a senior scholar and faculty member emeritus at Princeton University's Woodrow Wilson School. He is also a fellow at Hebrew University.

In 2007, Kahneman was presented with the American Psychological Association's Award for Outstanding Lifetime Contributions to Psychology[1].

Important Publications (Listed Chronologically)

• Tversky, A., & Kahneman, D. (1971). Belief in the law of small numbers. Psychological Bulletin, 76, 105-110.
• Kahneman, D., & Tversky, A. (1972). Subjective probability: A judgment of representativeness. Cognitive Psychology, 3, 430-454.
• Kahneman, D. (1973). Attention and effort. Englewood Cliffs, NJ: Prentice-Hall.
• Kahneman, D., & Tversky, A. (1973). On the psychology of prediction. Psychological Review, 80, 237-251.
• Tversky, A., & Kahneman, D. (1973). Availability: A heuristic for judging frequency and probability. Cognitive Psychology, 5, 207-232.
• Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185, 1124-1131. Science Mag Link
• Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decisions under risk. Econometrica, 47, 313-327.
• Tversky, A., & Kahneman, D. (1981). The framing of decisions and the psychology of choice. Science, 211, 453-458. Science Mag Link
• Kahneman, D., Slovic, P., & Tversky, A. (1982). Judgment under uncertainty: Heuristics and biases. New York: Cambridge University Press.
• Kahneman, D., & Tversky, A. (1984). Choices, values and frames. American Psychologist, 39, 341-350.
• Kahneman, D., & Miller, D.T. (1986). Norm theory: Comparing reality to its alternatives. Psychological Review, 93, 136-153.
• Kahneman, D., Knetsch, J.L., & Thaler, R.H. (1990). Experimental tests of the endowment effect and the Coase theorem. Journal of Political Economy, 98, 1325-1348.
• Kahneman, D., & Lovallo, D. (1993). Timid choices and bold forecasts: A cognitive perspective on risk-taking. Management Science, 39, 17-31.
• Kahneman, D., & Tversky, A. (1996). On the reality of cognitive illusions. Psychological Review, 103, 582-591.
• Kahneman, D., Diener, E., & Schwarz, N. (Eds.). (1999). Well-being: The foundations of hedonic psychology. New York: Russell Sage Foundation.
• Kahneman, D., & Tversky, A. (Eds.). (2000). Choices, values and frames. New York: Cambridge University Press.
• Kahneman, D. (2003). A perspective on judgment and choice: Mapping bounded rationality. American Psychologist, 58, 697-720.

References

Note: These references are presented in APA style, according to the Publication Manual of the American Psychological Association, 5th ed.

• Kahneman, D. (2003). Maps of bounded rationality: A perspective on intuitive judgment and choice. In T. Frangsmyr (Ed.), Les Prix Nobel 2002 [Nobel Prizes 2002]. Stockholm, Sweden: Almquist & Wiksell International. Note that this chapter has two sections: the first is an autobiography (with a eulogy for Amos Tversky), and the second is a transcript of his Nobel lecture, which is what the title refers to. The autobiographical portion has been republished as: Kahneman, D. (2007). Daniel Kahneman. In G. Lindzey & W.M. Runyan (Eds.), A History of Psychology in Autobiography, Volume IX (pp.155-197). Washington, DC: American Psychological Association. It is also available on the Nobel Prize website.
• Kahneman, D., & Beatty, J. (1966). Pupil diameter and load on memory. Science, 154, 1583-1585.
• Kahneman, D., Slovic, P., & Tversky, A. (1982). Judgment under uncertainty: Heuristics and biases. New York: Cambridge University Press.
• Kahneman, D., & Tversky, A. (1973). On the psychology of prediction. Psychological Review, 80, 237-251.
• Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decisions under risk. Econometrica, 47, 313-327.

Notable contributions

• anchoring and adjustment
• availability heuristic
• base rate fallacy
• conjunction fallacy
• framing (economics)
• loss aversion
• peak-end rule
• preference reversal
• prospect theory
• cumulative prospect theory
• reference class forecasting
• representativeness heuristic
• simulation heuristic
• status quo bias

See also

• Optimism bias
• Planning fallacy
• Reference class forecasting

External Links

• Daniel Kahneman's Official Home Page

• Daniel Kahneman CV, February 2008
• Nobel Prize lecture: Maps of Bounded Rationality (real video)
• Kahneman's Nobel Autobiography